China's exports and imports slowed their declines in March after falling in the previous two months, but a sure-footed recovery in trade appears to be months away as the coronavirus outbreak shuts down many economies and sharply reduces global demand.
Financial markets breathed a sigh of relief after customs data on Tuesday showed overseas shipments fell 6.6 per cent year on year in March, improving from a 17.2 per cent slide in January and February, as exporters rushed to clear a backlog of orders after forced government production shutdowns.
Analysts had forecast shipments would drop 14 per cent from a year earlier.
While the trade figures were not as bad as feared, analysts said the export and overall growth outlook for the world's second-biggest economy remains grim as the pandemic has brought business activity across the globe to a standstill.
"The above-expectation March trade figures do not mean that the future is carefree," said Zhang Yi, chief economist at Zhonghai Shengrong Capital Management in Beijing.
“A decline in exports throughout the second quarter has been the market consensus now and a drop of 20 per cent or more is a high-probability event. For policymakers, more policies should be rolled out to address the possible societal issues stemming from mass-scale unemployment,” Mr Zhang said.
The data showed imports slid 0.9 per cent from a year earlier, also above market expectations of a 9.5 per cent drop, which was attributed to improving domestic demand.
They had fallen 4 per cent in the first two months of the year.
Stock markets in Asia extended their gains after China's trade report, while risk sensitive currencies including the Australian and New Zealand dollars and the pound pulled ahead, mainly on relief on the less gloomy data.
Most analysts expect China's first-quarter gross domestic product data, set for release on Friday, to show a contraction – the first quarterly slump since at least 1992.
The pandemic’s sweeping impact on businesses and consumers has triggered an unprecedented burst of stimulus from policymakers around the world in the past two months.
Customs spokesman Li Kuiwen told a news conference that China’s trade showed some signs of recovery in March as domestic demand returns to normal, but he emphasised that difficulties facing foreign trade cannot be underestimated.
The World Trade Organisation last week forecast that goods trade would shrink more steeply this year than in the global financial crisis a decade ago before rebounding in 2021 as the Covid-19 pandemic recedes.
Beijing is trying to restart its engines after weeks of near paralysis to contain the pandemic that had severely restricted business activity, the flow of goods and the daily life of people.
But analysts said it could take months before the economy returns to normal as the virus has spread rapidly around the world, virtually shutting down many countries and raising the risk of a steep global recession this year.
Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note to clients that “headwinds to exports are set to intensify”.
“Shutdowns in China’s major export markets mean that the contraction in shipments is set to deepen further in the months ahead.”